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House passes Gregoire tax plan; Senate balks

• Published March 20, 2010

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The House voted 53-42 to approve Gov. Chris Gregoire's compromise tax package early this afternoon, turning aside GOP objections that no tax increase is needed.

It's still far from clear what it will take to bridge differences with the Senate, where pieces of Gregoire's plan are so objectionable a temporary sales tax is still a significant piece of that chamber’s proposal.

Senate Bill 6143 passed with votes from all of the Thurston County-area Democrats — Reps. Sam Hunt and Brendan Williams of Olympia, Kathy Haigh of Shelton and Fred Finn of west of Olympia. All local Republicans voted against — including Reps. Gary Alexander of Thurston County, Richard DeBolt of Chehalis, Tom Campbell of Roy, and Jim McCune of Graham.

Democrats omitted one piece of it — $11.6 million raised by letting the Department of Revenue define tax cheats and go after joint ventures that use “shell company” agreements to avoid paying sales taxes on services they provide. But the bill that passed is still worth $679.7 million, which goes together with a $1 per pack increase in cigarette taxes that the House passed last night.

Together those bills create a tax package of $788.3 million — shy of the Senate's $809 million.

In either case, it appears budget writers must carve a little deeper to make up for the lower revenue than the more than $900 million the Senate once envisioned. That could mean less new money put into health care for state employees, who face big hikes in out-of-pocket costs next year without at least $65 million in new general fund money (the House has reduced its offer to $55 million, and the Senate wants to put in less than half that).

As the tax action moves to the Senate, Gov. Chris Gregoire was expected to meet with leadership to talk over the situation today. And both the House and Senate plan to take Sunday off, except for budget and tax negotiators who will keep at it.

The Senate still lacks votes for elements of Gregoire's plan, and that is why that chamber is still standing by a 0.2 percent temporary increase in the state's 6.5 percent share of the sales tax. (That Senate sales tax position is scaled back from the 0.3-cent proposal it had been pushing since February.)

"We don't have the votes for it," Seattle Sen. Ed Murray, the Senate's top Democrat on the tax issue, said this morning, talking about the compromise that Gregoire offered Friday. "As the revenue lead on the Senate Ways and Means Committee, if we can find 25 votes for their revenue package or some other package, I'm happy to do that. I have no ideological lines in the sand over any of these items. But again, you've got to find the votes."

Controversial items include a tax on banks' mortgage-interest earnings, a sales tax on custom software and repealing a sales-tax exemption for out of state residents that helps businesses in Washington border counties, Murray said.

We have a story for tomorrow’s paper that will go in more detail. Go here for details on the tax compromise proposed by Gregoire. Here was our story today on Gregoire’s offer and the House reaction last night.

Here is a link to Senate Bill 6143, the main tax bill, as well as its amendments and vote history.